Germany’s inflation rate turned negative in
Jan for the first time in more than 5 years, aggravating
a slump in consumer prices in the euro area. Prices in Europe’s largest economy fell 0.5% from a
year earlier, the Federal Statistics Office said, the lowest rate since Sep 2009. The forecast
predicted a drop of 0.2%. The ECB committed last week to spend at
least €1.1T ($1.2T) on gov bonds to avert deflation in the euro area. Prices in the
19-nation bloc probably dropped this month at the 2nd-fastest
rate since the introduction of the single currency. The outlook for lower inflation is boosting bonds as it
preserves the purchasing power of their fixed payments.
Underscoring that point, Germany’s 30-year yield fell below 1% for the first time on record. The euro-area inflation rate was probably minus 0.5%
in Jan.

Bill Gross, former manager of the
world’s largest bond fund, said the Federal Reserve (FED) will
raise interest rates this year to end distortions that 6 years
of near-zero borrowing costs have brought to financial markets. Any increase by the FED will be slow to avoid startling
markets that have gotten used to cheap money, & caution will
prevail for a long time, Gross wrote in an investment outlook. He
likened financial markets to the board game Monopoly, in which a
bank, much like the FED, supplies money to players who invest it
in properties. Gross said the FED realizes that for the game to
function, players need incentives to invest. “Capitalism depends on hope –- rational hope that an
investor gets his or her money back with an attractive return,”
he wrote. “Without it, capitalism morphs and breaks down at the
margin. The global economy in January of 2015 is at just that
point with its zero percent interest rates.” He has previously said that falling oil prices &
a strong dollar constrain the FED from raising rates until late
this year, “if at all.” Gross said the
FED may move by “25 basis points in July or August.” He added
in his outlook that the FED “will move up the Monopoly board’s
interest rates in late 2015.” The FED “will be very slow. The curve suggests in February
2019, they will finally reach 2 percent in terms of the Fed
funds rate,” Gross said. “And I think that’s about right, but it
will take up three or four years to get there.”

Speculation had been building for some time that Don Thompson CEO of McDonald's, a Dow stock & Dividend Aristocrat, might be in trouble because of
its relative underperformance. The Golden Arches, with 36K
restaurants globally, has tremendous market share & reach, as well as
paying a rich div, but the stock trailed
many peers the last couple of years & patrons were voting to spend
their dollars elsewhere. Thompson
is retiring as CEO & will be replaced by Steve Easterbrook,
senior exec VP & chief brand officer. The change will be effective Mar 1. "Steve
is a strong and experienced executive who successfully led our U.K. and
European business units, and the board is confident that he can
effectively lead the company to improved financial and operational
performance," said Andrew McKenna, non-executive chairman. Thompson's comments were that "there is a
time and season for everything. I am truly confident as I pass the reins
over to Steve, that he will continue to move our business and brand
forward." The CEO change is the latest of several in the past few months at
MCD. Although Thompson's departure was described as a retirement, it does follow a disappointing year,
in which revenue fell for only the 2nd time in 20 years.
Additionally, 2014 was the 2nd-consecutive year that saw customer transactions decline.
The full-year earnings report was only issued last Fri. MCD has been adrift for months, promising to change
its menu, to make better use of technology & to be more open with
customers in an effort to not lose diners to competitors. While it remains an
incredibly large business, it was less & less clear what it truly
could do to serve up new growth. The shares, & revenue, were stellar
from 2003-2012, but it's been much tougher on the company since. One of the latest setbacks occurred last summer,
when its Asia operations were hurt by a supplier investigation in China. The stock jumped up 4.49. If you would like to learn more about MCD, click on this link:

McDonald's (MCD)

The oversold stock market had a rebound. It was due after Jan was turning out to be having one of its worst months in history. There are no shortage of problems. A new gov in Greece is trying to figure out to deal with tons of debt. The word default is being kicked around along with talk about leaving the EU. Russia's debt is now rated as junk. The MidEast is a confusing mess, that's where a lot of oil comes from. The oil market is a disaster bringing confusion to a lot of businesses. And the US recovery, while looking better in recent months, is still uneven as shown by today's housing data. Stocks are nearing the end of the month which means money managers will buy or sell anything to make their results look better. Sudden moves in either direction are always suspect. Market breadth was a bit thin today considering the advance by the averages.